Wall Street Brunch: The Grandaddy Of Earnings Reports

Summary:

• Nvidia reports earnings, making it the most important week of the year for the stock market.
• Fed chief Jay Powell acknowledges readiness to adjust policy, with upcoming data points including core PCE and jobless claims.
• Telegram founder arrested in France.

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AI chip demand has looked strong, but NVDA faces lofty expectations. (0:18) Fed’s favorite inflation gauge seen coming in cool after rate cuts signaled. (2:36) Telegram founder arrested. (4:23)

The following is an abridged transcript:

Artificial Intelligence wrestles the spotlight from the Fed this week as Nvidia (NASDAQ:NVDA) reports earnings on Wednesday.

Wedbush Securities analyst Dan Ives says that makes this week the most important of the year for the stock market.

Analysts expect Nvidia to report revenue of $28.7 billion, operating profit of $18.8 billion, and EPS of $0.64. R&D expenses for the quarter are forecast to be $3.0 billion.

Ives said that cloud numbers and AI data points from Microsoft (MSFT), Amazon (AMZN) and Google (GOOG) were strong during earnings season in an indication that massive enterprise AI demand is now underway.

Nvidia has had a strong start to the year, with Q1 numbers blazing in ahead of market expectations. Revenue shot up 262% to $26 billion in Q1, due largely to accelerating demand for its AI platforms.

According to Seeking Alpha analyst Nexus Research, who is bullish on the stock, the “delay in the shipping of Blackwell GPUs due to certain design flaws intensified the recent correction in the stock price. The fear is that such delays could create windows for rivals like AMD (AMD) and Intel (INTC) to capture some market share away from Nvidia.”

“Nonetheless, these fears have subdued somewhat amid demand for Nvidia’s previous generation chips, the Hopper series, remaining strong” and on the earnings call “investors should expect CEO Jensen Huang and CFO Colette Kress to repeatedly emphasize the continuous strong demand for H100/H200s until Blackwell starts shipping,” they said.

Roundhill Financial CEO David Mazza says: “Considering so much of this earnings season to date has been focused on corporate spending on AI, traders will want to see how much the stock can keep benefiting from this as it remains one of the only cut and dry AI winners.”

Seeking Alpha Analysts have a collective Hold rating on the stock.

Among other earnings this week, BHP (BHP), Heico (HEI) and Trip.com (TCOM) report on Monday.

Tuesday sees results from Bank of Montreal (BMO), Bank of Nova Scotia (BNS), PVH (PVH) and Box (BOX).

Along with Nvidia on Wednesday, Salesforce (CRM), Royal Bank of Canada (RY), CrowdStrike (CRWD), HP (HPQ), Okta (OKTA), J.M. Smucker (SJM), and Pure Storage (PSTG) weigh in.

Earnings from Dell (DELL), Marvell Technology (MRVL), Autodesk (ADSK), Dollar General (DG), Best Buy (BBY), Gap (GAP), Ulta Beauty (ULTA) and Lululemon (LULU) are due on Thursday.

Looking to the economy, it’s a new macro landscape with Fed chief Jay Powell acknowledging in Jackson Hole that the FOMC is ready to start cutting rates and easing policy.

The next big data point for the Fed will be the latest iteration of its favorite inflation gauge. The July core PCE arrives on Friday along with the personal income and spending numbers. On average, economists expect a 0.2% rise for the month.

Economists at Pantheon Macro say the “benign” July PPI and CPI numbers point to another low core PCE print, forecasting a rise of 0.13%.

They added that Powell’s change in tone at Jackson Hole “from the June FOMC meeting, just 10 weeks ago, is startling.”

“At that meeting, the Fed dropped two of the three easings previously anticipated, raised its core inflation forecast, and said it expected unemployment to remain unchanged for the remainder of the year. We said at the time that these forecasts were too bearish, arguing that the Fed will soon have to backtrack from the new dotplot, because the labor market likely will soften materially over the summer, while core PCE likely will be better than policymakers expect.”

If core PCE comes in as expected, the three-month annual rate of core PCE would drop to 2.1% — just a hair above the Fed target.

T.S. Lombard says: “Even if the dual mandate has gained more prominence in recent weeks, the key tail risk for the central bank remains inflation.”

Still, expect the weekly jobless claims figures on Thursday to continue to get extra attention after Powell said the FOMC “will do everything we can to support a strong labor market.”

A spike in claims could boost the odds of a half-point rate cut in September. Right now the market is pricing in a 3 in 4 chance of a smaller, quarter-point. But the market is still pricing in 100 basis points by the end of the year with only three meetings to go.

In the news this weekend, French authorities arrested Pavel Durov, the billionaire founder and chief executive of the online communications platform Telegram, on charges of spreading illicit material on the messaging app.

Reports say Durov, a Russian-born French and Emirati entrepreneur, was traveling on his private jet from Azerbaijan when he was detained near Paris.

Telegram has more than 900 million users worldwide and for years has been scrutinized by law enforcement agencies worldwide because terrorist groups, narcotics smugglers, arms dealers and extremist groups have used the app for encrypted communications.

Intel (INTC) is working with Morgan Stanley and others as it seeks to defend itself from activist investors with shares down nearly 60% this year.

No campaign from an activist has started, and it’s not clear if activists have contacted the chipmaker’s board, CNBC reported late Friday. Activists could target Intel as its stock has plunged nearly 40% over the past month. Second-quarter financial results and a third quarter outlook fell below consensus estimates. The company also announced plans to slash its workforce by 15% and suspended its dividend.

And Edgar Bronfman Jr. wants Paramount Global (PARA) to partner with a technology company like Amazon.com (AMZN) or Apple (AAPL) to improve its streaming business if his offer is chosen as the winning bid over Skydance Media.

Bloomberg says Bronfman believes that Paramount should have more specific skills for its streaming services, such as customer acquisition and ad sales. He submitted a $6 billion offer for National Amusements last week and is still working on getting the final signatures for his financing package, though he has all the investors in place.

For income investors, Hyatt and Johnson & Johnson (JNJ) go ex-dividend on Tuesday, both with a payout date of Sept. 10. Yum Brands! (YUM) goes ex-dividend on Tuesday as well, paying out on Sept. 6.

And eBay (EBAY) goes ex-dividend on Friday, with a payout date of Sept. 13.

And in the Wall Street Research Corner, Piper Sandler analysts selected 20 bottom-fishing stock ideas, based on its technical grade rankings. Technical grade rankings that improve from the high teens tend to fly more under the radar with investors than those closer to 1.

The stocks on the list have had technical grade rankings of 20 for at least the last trailing five weeks, but with this week’s ranking improving to 19 or lower.

Five of stocks on the list are also Buy-rated and have a bullish technical setup. They are Amphastar Pharmaceuticals (AMPH), Inspire Medical Systems (INSP), Omnicell (OMCL), SkyWater Technology (SKYT) and Teleflex (TFX).

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